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How to Retire by 50

For Darrow Kirkpatrick, retirement means no work, all play, and enough money to fully enjoy the golden years. And at just 50 years old, he's arrived.

“I’m not a dot-com millionaire. I didn’t flip real estate,” say Kirkpatrick. “I’m an engineer who saved a good chunk of his salary and lives carefully.”

I recently visited Darrow and wife Caroline at their home in Tennessee to learn his secrets to retiring some 15 years ahead of most Americans. He’s a former software engineer whose median income over the span of his career was roughly $100,000 a year. That’s a comfortable salary in a rural part of the country, but, still retiring by 50 is no easy feat.

“I think it’s very doable,” he says. “I didn’t really get interested in investing and early retirement until my mid-thirties and just pursued some consistent behaviors over the last decade.” “We never drove fancy cars,” Darrow says. “We don’t do a lot of fancy travel. We like to camp, climb, hike and bike so we don’t have a lot of expensive vacations, although we’ve had a lot of great ones.” It’s worth noting that his wife still works as schoolteacher, which helps to secure the family’s health insurance.

Darrow says his family has a monthly budget of about $4,500, totaling one to two million dollars in savings to support that lifestyle. While most of us strive to live within our means, Darrow went to the extreme and lived way below. He first tackled his monthly, recurring expenses by not just by lowering costs, but eliminating them altogether.

“My first answer to myself is usually ‘no’ for anything that I think of,” he says. “The key thing is recurring expenses. They’re critical because when you commit to a monthly charge, you’re locking in a certain lifestyle and you want to watch out that you’re not ratcheting that up to a level you’ll be committed to for the rest of your life.”

Take a simple gym membership, which can cost $60 a month. Going for free runs in the park, instead, and investing that expense conservatively for 20 years in a 401(k) or IRA could yield more than $20,000.

Yet another way to finish rich quick is to not adjust your lifestyle when raises, bonuses, or windfalls come your way. Darrow says when he or his wife received bonuses, it would generally go into their retirement plan and mortgage, which they paid off in less than 10 years. And while the rule of thumb for anyone trying to retire in their 60’s is to invest about 10 to 15% of their annual pay in a retirement account, Darrow was far more aggressive, putting nearly a third of his take-home income into retirement along with bonuses.

If you can’t save any more, consider earning more through an extra revenue stream, specifically for boosting your retirement savings. Darrow created a blog called “Can I Retire Yet,” devoted to early retirement, savings and investing. He doesn’t depend on it as a source of income, but he considers the small ad revenue “fun money” when it shows up.

When it comes to real estate, perhaps the biggest financial decision many of us will ever make, Darrow’s advice is to make the most of the home you have.

“We’re living in the same house we lived in 16 years ago,” he says. “Not only are you not paying to upgrade your house, but you’re not paying the transaction costs of buying another house. It can be $10,000 to $20,000, especially if there’s a move thrown in. I really think its important to stay put if you possibly can and you’re happy where you are.”

And while they’re happy their 21-year-old son is earning a degree, Darrow and his wife refused to compromise their savings or borrow giant loans just to send him to a pricey university. “I told my son he either needed to attend a public university or get a scholarship,” says Darrow. “He did both, which is awesome.”

As always, we want to hear from you. What do you think it takes to retire early? Connect with me on Twitter @Farnoosh, and use the hashtag #finfit.